Audiobooks are growing fast, driven by smartphone adoption and better supply, as well as interest from people who don’t usually buy books, such as young men

The sector is dominated by the presence of Audible, Amazon’s audiobook publisher/retailer, which has driven growth of audiobooks but put publishers under pressure. Its strategy is a lesson in Amazon’s approach to media

Audio is an opportunity to sell to new customers, but publishers must acquire and use rights responsibly, and experiment while not letting the audio tail wag the print dog

Sky maintained strong revenue growth of 5% in 2017/18, with EBITDA and operating profit both bouncing back into strong positive territory after the UK Premier League rights hit of 2016/17

The UK grew revenue well and profits better; Italy performed well and should improve much further given the retreat of its principal competitor; Germany is more challenged, but extra content investment may aid sustained growth

Sky is proving adept at managing content costs and revenue in a changing environment, with investment, cost control and monetisation all being put to effective use as the content type demands it

This third edition of Europe's Creative Hubs, produced on behalf of Bertelsmann, highlights the challenges of the digital age for enterprises of the creative industries of France, Germany and the UK from new consumer behaviours and the advent of new competitors and new forms of competition for users and customers from tech giants, Amazon, Facebook, Google and Netflix. The report calls upon policymakers in Europe to ensure a level playing field for traditional media in the key areas of taxation, competition law, privacy and data protection, highlighting the interaction of these three in the market for online advertising.

The UK continues to lead the EU5 in take-up and consumption of video-on-demand services, with close cultural alignment and a historic williness to pay for TV content making it a receptive home for US SVODs

Netflix dominates in most markets, benefiting from high-profile US imports and big-budget local productions. Local SVODs are struggling, with those operated by FTA broadcasters facing considerable challenges

Collaboration between local broadcasters and pay-TV platforms is essential if they are to hold at bay the threat of Netflix and co., with an increasingly favourable regulatory environment opening the door for unprecedented collaboration

Spotify is now the world’s first publicly listed on-demand music streaming service. Its global footprint generated €4 billion in 2017 from over 70 million paying subscribers and 90 million ad-funded users across 65 countries

As it expands, the service is steadily but surely moving ever closer to profitability, with a 2019 operating profit a very real prospect

So far and for the near future, Spotify’s global pre-eminence versus competition from Apple, Amazon and Google proves remarkably resilient. Plans to build upon its differentiating features will become ever more decisive as the tech titans will continue to wield their resources and ecosystems against the comparatively undiversified company

Linear TV's decline continued into 2018, with an overall drop of 3% across the first 12 weeks YOY. However, overall TV set usage remained flat at 4 hours/day, as time spent on unmatched activities—which includes Netflix, Amazon and YouTube—continues to rise.

Within the ever-shrinking pie of consolidated viewing to the TV set, share of viewing (SOV) to the ten largest channels remains broadly flat. Across the whole of 2017 and the start of 2018 the best performer has been ITV (main channel).

Several big-name digital channels are showing surprising signs of recent decline, including UKTV’s Drama and Viacom’s 5USA. It is too early to tell if these declines are a blip or a trend. However, they reflect stalling growth from the long tail of digital channels in aggregate. 

Sky H1 results were very solid, maintaining 5% revenue growth and 10% EBITDA growth, with Sky continuing to support a widening product portfolio and more expensive core products with strong cost control and execution

Subscriber volume growth was a little weak at the margin, but this will be helped by all-IP products expanding the economically addressable base in new, and existing, markets 

There remain questions on content, with the outlook for premium football rights uncertain in the UK and Italy, and investment in Originals questionable given a mixed track record, but certainly with upside

On 28 June, News Corporation split into two companies:
• 21st Century Fox will consist of the TV and entertainment assets: Cable Network Programming, Fox Filmed Entertainment, Television, Sky Italia, its 55% stake in Sky Deutschland and its 39% stake in BSkyB.
• New News Corp will consist of the publishing assets (Dow Jones, The Sun and Times/Sunday Times, the New York Post, News America Marketing Group, the Australian newspapers and Harper Collins), as well as Fox Sports Australia, the digital education business Amplify, a 61.6% stake in digital property business REA Group Limited and a 50% stake in Australian pay-TV operator Foxtel.

The split partly reflects industry trends. Over the last five years, a number of media conglomerates, including McGraw-Hill and Time Warner, have separated low growth, low multiple publishing assets from higher growth parts of the businesses in order to optimise valuations and management focus.

This report provides a breakdown of the divisions within the two new companies and analyses their growth prospects.

Germany’s fixed line market is in state of flux as Liberty Global and Vodafone, the third and fourth largest players respectively, are reportedly engaged in a bidding war for Kabel Deutschland (currently number two).

The Vodafone bid would offer the most direct cost synergies, but this would be at greater execution risk. The Liberty bid would finally reunify most of the German cable sector, but would consequently need stronger undertakings to get anti-trust clearance.

Either merger would create a strong number two triple play operator, increasing competitive pressure on Deutsche Telekom and Sky Deutschland.

Sky Deutschland is reaping the benefits of its re-launch using BSkyB’s model, with an improving content offering and quality of user experience, plus a favourable environment for household consumption in Germany.

2012 results came in very close to our forecasts and we predict that Sky Deutschland will break even at EBITDA level in 2013 and turn cash flow positive in 2015.

The competitive context is benign and the horizon is clear until the next Bundesliga auction in 2016. But, in the meantime, cable, IPTV, FTA and OTT players are committed to widening their pay offers, which may put pressure on Sky’s subscriber growth and content costs.